Buying and Selling Properties in Australia

Australia’s real estate landscape is diverse, with each state having its own legislation and market characteristics. This diversity extends to the conditions and processes that apply when buying and selling. Whether you’re a buyer, seller, or agent, understanding these variations is essential to ensure you get the best result come sale time. In this article, we will explore the top five differences between the east and west coast markets in Australia.

Sales Methods

One of the first key distinctions between the WA and east coast markets is the methods of selling.

Private Treaty Sales in WA

Private treaty sales with standardized contracts are the most common way to sell in Western Australia (WA). Both buyers and sellers prefer this process due to its consistency. Private treaty sales allow buyers to include conditions such as subject-to-finance or subject-to-sale clauses in their offers. Auctions are less common in WA and usually require buyers to be unconditional, meaning they must be cash buyers or have finance pre-approved.

Auctions and Private Treaty Transactions in the Eastern States

On the other hand, the Eastern States use a mix of auctions and private treaty transactions. Auctions are common, and buyers prefer them as they prevent a tactic called ‘gazumping’. Gazumping occurs when a seller accepts a higher offer despite having already accepted a previous offer. With auctions, both east coast buyers and sellers have certainty. Once the hammer falls, the deal is done.

It is important to note that gazumping does not occur in WA. Once an offer is accepted, the seller cannot take up another offer. The exception is where the buyer’s offer is subject-to-sale of another property, and the contract includes a 48-hour clause. In this instance, if the seller receives what they consider to be a better offer, they can invoke the 48-hour clause, and the buyer has 48 hours to make their offer unconditional.

Cooling-off Periods

Another notable difference between the east and west is the presence of cooling-off periods in some states, which allow the buyer to withdraw from a private treaty transaction with penalties. East coast buyers often benefit from a period of up to five days during which they can reassess their decision and review their financial situation. However, there is no cooling-off period for auctions.

In contrast, WA transactions don’t incorporate a formal cooling-off period. Once a contract is signed, the parties are bound, which provides certainty for sellers. The only exception to this is when the buyer is unable to obtain finance, in which case a conditional sale would fall through.

Contract Preparation

In WA, the Real Estate Institute of Western Australia (REIWA) has developed standardized contracts that are widely used across the market. These contracts are regularly updated to reflect changes in legislation, making the process more streamlined and transparent for both buyers and sellers.

In the Eastern States, it’s a different ballgame. Sellers often engage solicitors to craft personalized contracts with terms that favor them. These seller-centric contracts can catch buyers out, so it is often recommended that WA buyers investing in east coast markets enlist a buyer’s agent or solicitor who understands the market and the terms used in these contracts.

Deposit Amounts

When it comes to deposits, buyers in WA have the advantage of being able to offer smaller sums than their east coast counterparts. In a private treaty sale, WA buyers often aren’t required to pay a fixed percentage as a deposit. It is generally between $10,000-20,000 when the contract has been accepted, giving them greater flexibility and allowing them to keep more cash in hand throughout the sale process. Auctions usually require a 10% deposit on the day.

Over east, sellers typically demand a more substantial deposit, commonly set at 10% of the property’s purchase price. For example, for a $600,000 property, this would equate to $60,000. This could be incredibly challenging and potentially delay the purchase for some buyers, especially first-home buyers.

It is important to note that the deposit paid when an offer is accepted is not the same as the deposit lenders require when buyers apply for a loan.

Rental Returns

East coast investors are often delighted by Perth’s rental yield. Many investors choose to invest in WA over the Eastern States because of the confidence they have in getting a good return. For WA investors, choosing to spend in their own backyard might be a better choice than investing over east.

For example, a property in Perth’s CBD that could receive $650 per week in rental income might be worth $450,000-500,000. An equivalent property in Sydney could cost upwards of $700,000. This difference becomes a critical consideration for investors evaluating their opportunities in either region.

In conclusion, buying and selling properties in Australia can vary significantly depending on the state and coast. Understanding the differences in sales methods, cooling-off periods, contract preparation, deposit amounts, and rental returns is crucial for buyers, sellers, and agents. Whether you are looking to invest in Western Australia or the Eastern States, being aware of these variations will help you navigate the real estate market and make informed decisions.